Cycle to work scheme

The1nonly1 · 8 May 2014 at 12:33

Hi,

Can somebody explain how this works? I understand that you get a certificate to take to the place you are getting your bike from but how is it paid for? Do I pay out of my wage from my employer?

Lots of information would be greatly appreciated.

Thanks

tom_e · 8 May 2014 at 12:44

http://www.cyclescheme.co.uk/ and http://www.cycle2work.info/ will tell you all you need to know.

Vonhelmet · 8 May 2014 at 12:52

The1nonly1 said:
Hi,

Can somebody explain how this works? I understand that you get a certificate to take to the place you are getting your bike from but how is it paid for? Do I pay out of my wage from my employer?

Lots of information would be greatly appreciated.

Thanks

Your employer loans you the money to buy the bike and qualifying accessories, and then you pay it back out of your gross salary, so you save the tax and NIC on the cost. At the end of the term of the deal the bike reverts to your employer, but your particular employer will probably either give it you, in which case you'll pay tax on it as a gift, or you'll pay an agreed value for the bike, like 25% of the cost or something, which can be settled in various ways with varying consequences.

That's a rough general summary. The specifics will depend on the particular deal on offer and on how much you, your employer and the bike shop bend the rules.

Glaucus · 8 May 2014 at 12:58

Area looks crape, it's not just a loan, at the end you have to pay more on top.
Is there different styles or are they all like this.

This is cyclescheme

The balance of the bike is deducted via salary sacrifice. At the end of the hire period, the employee pays a Market Value payment to make the bike theirs. Cyclescheme can collect this payment for you.

So on a £600 bike you pay £408 out off your wage and then a ???? At the end.

Once you factor that in, it looks pretty rubbish. And the saving tool, doesn't add that value in.

Shame as I wanted to use it, when it comes around again in june.

Right here we go.

So cheapest way is £426 3%. Or most expensive £558 @ 25%

If you leave your job, you pay remaining balance without the tax relief.

So basically just a free loan. But by shopping outside the scheme could probably find a better deal.

The1nonly1 · 8 May 2014 at 13:11

Vonhelmet said:
Your employer loans you the money to buy the bike and qualifying accessories, and then you pay it back out of your gross salary, so you save the tax and NIC on the cost. At the end of the term of the deal the bike reverts to your employer, but your particular employer will probably either give it you, in which case you'll pay tax on it as a gift, or you'll pay an agreed value for the bike, like 25% of the cost or something, which can be settled in various ways with varying consequences.

That's a rough general summary. The specifics will depend on the particular deal on offer and on how much you, your employer and the bike shop bend the rules.

Thanks, so if im paid £1300 per month now (net wage), will the cycle scheme payment be taken from this, reducing my monthly net wage?

FrenchTart · 8 May 2014 at 13:13

The cyclescheme money is deducted from your gross salary so you'll make tax savings on the payments. It works out a bit cheaper than just buying the bike outright (even factoring in the extra payment at the end) but if you can get a bike on sale and afford to pay for it there and then (or use the interest free payment plans that some bike stores offer) you could potentially get a better deal.

Vonhelmet · 8 May 2014 at 13:50

Glaucus said:
Area looks crape, it's not just a loan, at the end you have to pay more on top.
Is there different styles or are they all like this.

This is cyclescheme

So on a £600 bike you pay £408 out off your wage and then a ???? At the end.

Once you factor that in, it looks pretty rubbish. And the saving tool, doesn't add that value in.

Shame as I wanted to use it, when it comes around again in june.

Right here we go.

So cheapest way is £426 3%. Or most expensive £558 @ 25%

If you leave your job, you pay remaining balance without the tax relief.

So basically just a free loan. But by shopping outside the scheme could probably find a better deal.

You're wrong. You can save a lot on the cycle scheme.

On a £1,000 bike, you save £320 in tax and NIC, because the repayments are made before tax and NIC. If the bike is valued at £250 at the end of the year, and the employer notionally pays you the salary required for you to pay the cost of you buying the bike from them, you then pay £82 in tax and NIC. You've then paid £762 over the course of a year for a bike that is worth £1,000.

You will save even more as a higher rate taxpayer.

I'm a chartered tax adviser. I'm not wrong on this.

Mr Jones · 8 May 2014 at 14:32

Don't forget, most cycle scheme also allows for accessories like bike lock (can be very expensive), helmet, jersey / shorts (as long as there's some kind of 'high vis') and some local bike stores are happy to include clipless bike pedals if the price for them, is right.

I've just done a final payment of under £70, plus £980 off my gross salary. I've saved about £150 off the purchase including all extra payment to keep the bike for another 3 years - which I essentially own and will forfeit the deposit to keep / sell the bike on.

i.e, the more tax you pay, the more savings you get - esp higher rate earner.

Glaucus · 8 May 2014 at 14:34

Still sounds terrible. In 1000 you've saved 150, by shopping around young could more than likely have saved more.

tom_e · 8 May 2014 at 14:41

Glaucus said:
Still sounds terrible. In 1000 you've saved 150, by shopping around young could more than likely have saved more.

Not always a lot of the higher end bikes are pretty much the same price nevermind where you go, unless you get lucky with a sale of some sort.

Vonhelmet · 8 May 2014 at 14:53

Glaucus said:
Still sounds terrible. In 1000 you've saved 150, by shopping around young could more than likely have saved more.

No, in £1,000 you save £238 as a basic rate payer, much more as a higher rate payer. And what's your point about shopping around? If you can, you shop around and then take up the scheme where the bike you want is cheapest anyway :confused:

Or you max your budget if you're limited by shops. For example, if you think you can "shop around" and get better than the Planet X ultegra carbon bike for £999, then go ahead, but you can't.

Glaucus · 8 May 2014 at 15:00

Vonhelmet said:
No, in £1,000 you save £238 as a basic rate payer, much more as a higher rate payer. And what's your point about shopping around? If you can, you shop around and then take up the scheme where the bike you want is cheapest anyway Or you max your budget if you're limited by shops. For example, if you think you can "shop around" and get better than the Planet X ultegra carbon bike for £999, then go ahead, but you can't.

That isn't what Mr Jones has posted. He's posted a saving of 150 on just over 1000,

Scheme is limited to certain shops, so you can't shop around as much. You can nearly always get better deals shopping around. Yes you can pick one or two bikes that are stuck at rrp. But there's huge amounts if deals around on mist bikes.

tom_e · 8 May 2014 at 15:01

Glaucus said:
That isn't what Mr Jones has posted. He's posted a saving of 150 on just over 1000,

Scheme is limited to certain shops, so you can't shop around as much.

He's also saved the tax payments on that money as well though which is where the extra saving comes from, if I'm reading it correctly.

FrenchTart · 8 May 2014 at 15:03

Glaucus said:
That isn't what Mr Jones has posted. He's posted a saving of 150 on just over 1000,

Scheme is limited to certain shops, so you can't shop around as much.

Part of Vonhelmet's point is that the PX Ultegra Carbon bike at £999 is pretty much unbeatable at that price...so even if you were to shop around as much as you wanted to you wouldn't find anything of similar spec or better for the price (in fact, most places would be substantially more expensive).

Even once you factor in PX charging a 10% cyclescheme fee you're saving money and also spreading the cost in a way that benefits you.

It's often worth doing even if it's not as simple as "woo, I just saved £300+".

meandu229 · 8 May 2014 at 15:05

You also get to pay it off over the year and not all at once.

Glaucus · 8 May 2014 at 15:07

FrenchTart said:
Part of Vonhelmet's point is that the PX Ultegra Carbon bike at £999 is pretty much unbeatable at that price...so even if you were to shop around as much as you wanted to you wouldn't find anything of similar spec or better for the price (in fact, most places would be substantially more expensive).

Even once you factor in PX charging a 10% cyclescheme fee you're saving money and also spreading the cost in a way that benefits you.

It's often worth doing even if it's not as simple as "woo, I just saved £300+".

My point is you can't use one bike as an example. There's a huge amount if deals available on bikes. And a lot not covered by the scheme. From what I can see you would be better off the majority of the time funding better deals and chucking it on an interest free card.

Remember if you leave the company you have to pay the full remaining balance. So not only are you unlikely to have got the best deal, you're now paying full price. If you leave the clothing into the hire period.

If you've worked it all out and it's still cheaper great, it just doesn't like that generally the case, especially with their misleading clculator and the fact it's a higher purchase with a final payment partially hidden away.

FrenchTart · 8 May 2014 at 15:10

Glaucus said:
My point is you can't use one bike as an example. There's a huge amount if deals available on bikes. And a lot not covered by the scheme. From what I can see you would be better off the majority of the time funding better deals and chucking it on an interest free card.

Remember if you leave the company you have to pay the full remaining balance. So not only are you unlikely to have got the best deal, you're now paying full price. If you leave the clothing into the hire period.

Regarding your second point I guess it depends on how likely you are to leave the company. Personally I've worked at the Uni for about 8+ (omgz, so long) years, even if I've moved roles within it. For me the likelihood of leaving is pretty low.

There are also other bikes at various price points that are pretty hard to beat. Sometimes it can be worth getting something on an interest free credit type arrangement but it's more often than not worth purchasing things through the scheme. That said, I've not really looked at the market for bikes below the £500 mark much for a long time so for lower-end bikes it could be a different matter.

Vonhelmet · 8 May 2014 at 15:30

For any given bike, assuming continued employment, you will always save in the region of 25% as a basic rate taxpayer, and 30% as a higher rate taxpayer.

You can not dispute this - it is very basic maths. Couple that with it being an interest free loan over 12 months and it is an absolute no brainer.

Vonhelmet · 8 May 2014 at 15:32

Mr jones quoted £980 off gross salary. That's about £700 net if he's a basic rate payer, more like £600 if he's a higher rate payer.

helpimcrap · 8 May 2014 at 15:46

Vonhelmet said:
You're wrong. You can save a lot on the cycle scheme.

On a £1,000 bike, you save £320 in tax and NIC, because the repayments are made before tax and NIC. If the bike is valued at £250 at the end of the year, and the employer notionally pays you the salary required for you to pay the cost of you buying the bike from them, you then pay £82 in tax and NIC. You've then paid £762 over the course of a year for a bike that is worth £1,000.

You will save even more as a higher rate taxpayer.

I'm a chartered tax adviser. I'm not wrong on this.

For me - £1000 bike.
£71x12 monthly payments.
£70 (for 3years) or £250 (total ownership I think it was.

So:-
£71x12 = £852
+ £70
= Total of £922.

Used to be a good deal... like everything since the increase in popularity of cycling the amount saved has gone down....